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Gaming machine entitlements

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The Expression of Interest (EOI) process commenced on 5 October 2017. The EOI process is open to new entrants and to incumbent venue operators seeking to purchase new entitlements for use in a venue that was not an approved venue on 7 July 2017.

New entrants do not have to hold a valid Venue Operator's Licence (VOL) in order to participate in the initial stages of the allocation process. The only requirement for participation is that new entrants lodge an expression of interest in accordance with the process communicated by government. If a new entrant has lodged a valid EOI form by 3 November 2017, they will be eligible to receive the Minister's pre-offer letter and subsequently the Minister's formal offer in relation to new entitlements.

However, a new entrant must have a valid VOL in place in order to be able to respond to the Minister's offer and execute the Deed Poll. It is currently intended that a response to the Minister's offer will be required by the end of February 2018. Under the Gambling Regulation Act 2003, entitlements cannot be allocated to an entity that does not have a VOL.

All parties that do not currently hold a VOL but intend to participate in the allocation process are strongly encouraged to commence the VOL application process in order to ensure that the VOL is in place prior to February 2018. Relevant information can be found on the VCGLR website (External link)

Expression of interest process for purchasing new entitlements for a proposed new venue

The process to allocate post-2022 entitlements has commenced with the expression of interest (EOI) process for purchasing new entitlements for use in a proposed new venue. A high-level overview of the allocation process which focuses on Stage 1: EOI can be downloaded here

Detail of the overarching allocation process, the EOI process, new entitlement payment arrangements and other relevant information is available by clicking on the headings below.

Allocation process

Expression of interest process for gaming machine entitlements for a proposed new venue

Payment arrangements

Indicative entitlement pricing

Tax arrangements from August 2022

Announcements

Allocation and pricing of future gaming machine entitlements

Important disclaimer

The following information is provided as a guide to how future gaming machine entitlements will be allocated and priced. The information is subject to the Gambling Regulation Act 2003 and determinations by the Minister for Consumer Affairs, Gaming and Liquor Regulation (Minister) under that act, including any transfer and allocation rules that the Minister may make.

The new tax rates set out below that will apply from August 2022 are subject to the passage of legislation through the Parliament.

The Department makes no representation or warranty about the completeness, accuracy or suitability of the information for any purpose. The State of Victoria is not liable to you or any other person for any loss or damage arising from the use of or reliance on the information.

Allocation process

All venue operators will have the opportunity to acquire up to the number of entitlements they held on 7 July 2017. This is subject to any change the Minister may make to the maximum number of entitlements that can operate under the relevant regional cap or municipal limit and compliance with the allocation rules made by the Minister.

The Minister will write to each venue operator, including those venue operators who did not hold entitlements on 7 July 2017, inviting the venue operator to nominate the number of entitlements they wish to acquire.

Following receipt of each venue operator’s nomination, the Minister will allocate the nominated number of entitlements to each club and hotel venue operator who held entitlements on 7 July 2017, up to a maximum equal to the number of entitlements held on that day.

After the Minister has allocated entitlements to each venue operator who held entitlements on 7 July 2017 (up to the maximum held on 7 July 2017), any ‘left over’ club entitlements will be allocated to clubs in the following order of priority:

  • firstly to new club entrants
  • secondly to incumbent club venue operators seeking additional entitlements up to 420, and
  • thirdly to club venue operators seeking to buy more than 420 entitlements up to a maximum of 840 entitlements.

If there are any club entitlements left over after the above process is completed, the Minister will make a decision as to how many unallocated club entitlements (if any) will be transferred into the hotel entitlement pool.

After the allocation to clubs is completed, the Minister will allocate any unallocated hotel entitlements in the following order of priority:

  • firstly to new hotel entrants, and
  • secondly to incumbent hotel venue operators seeking to acquire additional entitlements over and above those held on 7 July 2017.

If demand exceeds supply at any step in the allocation process entitlements will be allocated on a proportional basis (where possible).

Expression of Interest process for gaming machine entitlements for a proposed new venue

On 5 October 2017, the first stage of the allocation process for post-August 2022 gaming machine entitlements (new entitlements) commenced.

The expression of interest process is open to new entrants and to incumbent venue operators seeking to purchase new entitlements for use in a venue that was not an approved venue on 7 July 2017 (new venue).

New entrants

If you did not hold gaming machine entitlements on 7 July 2017, and you want to acquire new entitlements to operate in a new venue on or after 16 August 2022, you are a new entrant.

In order to be eligible to participate in the latter stages of the allocation process, new entrants must lodge an expression of interest in accordance with the process set out below.

Incumbent venue operators

If you held attached or unattached entitlements on 7 July 2017, or acquired a gaming business with entitlements after 7 July 2017, you are an incumbent venue operator.

Incumbent venue operators wanting to acquire new entitlements to operate in a proposed new venue must lodge an expression of interest in accordance with the process set out below in relation to a proposed new venue only.

Incumbent venue operators are not required to lodge an expression of interest in relation to entitlements held on 7 July 2017. You will automatically be given the opportunity to acquire up to the number of entitlements you held on 7 July 2017 and do not have to lodge an expression of interest unless you are proposing to operate entitlements in a new venue on or after 16 August 2022.

New entitlement price

The price payable by you for a new entitlement for a proposed new venue will be based on the gaming machine revenue of a venue of similar size, type and location.

If, once you start operating gaming machines under new entitlements, the characteristics of your venue are significantly different to those indicated in your expression of interest form, the price of your new entitlements may be adjusted.

You will find useful tips on how to ascertain an indicative new entitlement price, including a simple pricing calculator below.

Allocation and transfer rules

The gaming machine entitlement allocation process is governed by gaming machine allocation and transfer rules (Rules) made by the Minister for Consumer Affairs, Gaming and Liquor Regulation (Minister) under sections 3.4A.3 and 3.4A.5(9) of the Gambling Regulation Act 2003. The Rules that govern the expression of interest process were published in the Victorian Government Gazette (No: G40/17) on 5 October 2017 (External link)

You are encouraged to carefully review the Rules and the information on this website. You are also encouraged to familiarise yourself with the gaming machine caps and limits. This information can be found on the Victorian Commission for Gambling and Liquor Regulation website at vcglr.vic.gov.au (External link)

Expression of Interest process

To be eligible to acquire new entitlements for a proposed new venue you must download, complete and sign the expression of interest form

The form requires you to nominate how many new entitlements you wish to acquire (within an indicative range) and the location and type (club or hotel) of the venue in which you propose to operate those entitlements (your proposed new venue).  

If you plan to operate more than one new venue you must submit a separate form for each venue.

You must submit the completed form by 3 November 2017 by posting the signed original to:

Gambling Licensing Program
Office of Liquor, Gaming and Racing
Department of Justice and Regulation

Level 29
121 Exhibition St
Melbourne 3000.

If your completed expression of interest form is not received by this date you may not be eligible to receive an offer from the Minister to acquire new entitlements for your proposed new venue.

Next steps

Following the receipt and assessment of your expression of interest form, the Minister will provide you with the price payable for new entitlements for your proposed new venue. You will have the opportunity to seek a review of this price if you believe it has been calculated incorrectly.

The Minister will then make a formal offer to purchase new entitlements to eligible venue operators and determine how many entitlements each eligible venue operator will be allocated.

Further information will be provided to you in due course to guide you through the next stages of the allocation process. It is intended that the allocation process will be completed by mid-2018.

Disclaimer

In order to implement the new gaming machine arrangements, amendments to the Gambling Regulation Act 2003 are required (proposed amendments). The proposed amendments are set out in the Gambling Regulation Amendment (Gaming Machine Arrangements) Bill 2017, which can be accessed at legislation.vic.gov.au (External link)

As it cannot bind the Parliament of Victoria, the State of Victoria gives no warranty that the proposed amendments will be passed by the Parliament. The State will not be liable to you or any person in the event that the proposed amendments are not passed. Without limitation, the State will not be liable to compensate you or any other person for any costs, expenses or losses incurred or suffered by you or any other person in evaluating, acting upon or in submitting an expression of interest to purchase new entitlements.

If you have any queries about the expression of interest process, please contact the Gambling Licensing Program at olgr.gmap@justice.vic.gov.au (External link)

Payment arrangements

Venue operators will be required to pay a deposit for the entitlements they acquire during the allocation process, with the balance payable in August 2022. Deferred payment terms will be available.

Payment terms

If you are allocated new entitlements, these will be subject to the following payment terms:

Deposit
  • clubs – 5 per cent
  • hotels – 10 per cent.

The deposit will be able to be paid in two instalments:

  • clubs: 2.5 per cent payable in February 2018 and 2.5 per cent payable in February 2019 (5 per cent total deposit)
  • hotels: 5 per cent payable in February 2018 and 5 per cent payable in February 2019 (10 per cent total deposit).

Hardship arrangements for payment of deposit will be available upon application (using current hardship process and criteria).

Payment of balance

The balance of 2022 entitlement price will be due on 16 August 2022 (upon commencement of the entitlement).

Venues will be given the option to pay the outstanding entitlement price in full or enter into a deferred payment arrangement.

The maximum term for deferred payments will be seven years for clubs and five years for hotels.

Interest will be incurred on deferred payments, as follows:

  • clubs: rate equivalent to the 10-Year Commonwealth bond rate over the full repayment term
  • hotels:
    • rate equivalent to the 10-Year Commonwealth bond rate for the first 2 years of the term
    • rate equivalent to the 10-Year Commonwealth bond rate plus 2 per cent for the remainder of the term.

Indicative entitlement pricing

Price for venue operators with operating entitlements

Venue operators will have the opportunity to acquire up to the number of entitlements they held on 7 July 2017.

The majority of entitlements held on 7 July 2017 are being used to operate gaming machines (‘operating entitlements’). A small number of entitlements are held but not being used by venue operators (‘non-operating entitlements’).

For operating entitlements, the price will vary for each venue and will be calculated based on each venue’s average gaming revenue per machine. The formula will use revenue for the years 2013-14 to 2016-17. Each year’s revenue will be given a weighting, with greater weight being given to the most recent revenue data. The weightings used will be:

  • 2013-14 – 10 per cent
  • 2014-15 – 20 per cent
  • 2015-16 – 30 per cent
  • 2016-17 – 40 per cent.

The weighted average gaming revenue per machine for each venue is then multiplied by a State Multiplier of 46.35 per cent to arrive at the entitlement price for that venue (subject to the minimum price – see below).

This produces the following pricing formula:

A x B = EP
where:

  • A = Weighted average of a venue's gaming revenue per EGM over the last 4 financial years
  • B = State Multiplier at 46.35%
  • EP = 2022 entitlement price.

Price for venue operators with non-operating entitlements

The majority of venue operators who hold non-operating entitlements also have operating entitlements for which an entitlement price will be determined using the pricing formula above.

Where a venue operator who holds operating and non-operating entitlements operates only one venue, the entitlement price for the non-operating entitlements will be the same as the price paid for operating entitlements at that venue.

Where the venue operator operates more than one venue, the average entitlement price for the entitlements at the venue operator’s existing venues will be the price for the venue operator’s non-operating entitlements.

Where a venue operator holds non-operating entitlements but does not operate a venue, the entitlement price will be calculated in the same way as the price for new venue operators (see below).

Price for new venue operators

New venue operators for the purposes of the allocation process are venue operators who did not hold any entitlements on 7 July 2017 but who want to acquire entitlements during the allocation process.

Under the allocation process new venue operators will be able to register their interest in purchasing entitlements. In order to participate in the allocation process, potential new venue operators must hold a venue operator licence issued by the Victorian Commission for Gambling and Liquor Regulation.

New venue operators will need to nominate how many entitlements they wish to acquire and the location and type of venue (club or hotel) in which they plan to operate those entitlements. This will enable the entitlement price to be determined.

The price for new venue operators will be based on the gaming revenue of a venue of similar size, type and location as the new operator’s proposed venue.

There will be an adjustment to the price for new venue operators once they start operating gaming machines under entitlements acquired during the allocation process if the size, type and location of the venue is significantly different to that nominated during the allocation process.

If you are a potential new venue operator, you can calculate an indicative entitlement price using the pricing formula above and the historical gaming revenue data for a venue of a similar location, size and type. This data is available on the Victorian Commission for Gambling and Liquor Regulation’s website (External link)

Alternatively, an indication of price can be obtained by using 2016-17 data for a similar venue using the simple pricing calculator provided below. You will need to enter the 2016-17 gaming revenue data for a venue of your choice in the gaming machine revenue field below, then enter the number of gaming machines operating at that venue in 2016-17 in the number of EGMs field. The calculator will then provide an indicative price per entitlement for that venue.

Minimum price

There will be a minimum price for all entitlements, regardless of the price determined by the pricing formula. The minimum price will be $5170 per entitlement for club entitlements and $32,714 per entitlement for hotel entitlements.

Tax arrangements from August 2022

The current tax arrangements will be amended to:

  • introduce a new tax bracket for venue operators earning between $6667 and $12,500 per month in average per machine revenue
  • increase the tax rate for the top (highest paying) bracket
  • introduce a sliding scale for the club tax concession.

The tables below show the current and new tax brackets and rates, as well as the new sliding scale for the club tax concession.

Tax rate and threshold tables for clubs and hotels

Club tax rates: current and from August 2022
Monthly average per machine revenue ($) Current: tax rate (%) Monthly average per machine revenue ($) From August 2022: tax rate (%) Tax concession rate (%)
Less than 2666 0 Less than 2666 0 8.33
2666 or more and less than 12,500 46.70 2666 or more and less than 6667 46.70 8.33
6667 or more and less than to 12,500 51.17 6.33
12,500 or more 54.20 12,500 or more 60.67 4.33

Hotel tax rates: current and from August 2022
Monthly average per machine revenue ($) Current: tax rate (%) Monthly average per machine revenue ($) From August 2022: tax rate (%)
Less than 2666 8.33 Less than 2666 8.33
2666 or more and less than 12,500 55.03 2666 or more and less than 6667 55.03
6667 or more and less than to 12,500 57.50
12,500 or more 62.53 12,500 or more 65.00

Announcements

Detailed Questions and Answers on the Post-2022 Gaming machine allocation process now available

11 August 2017 - A fairer pricing system for gaming machines in Victoria

The new gaming machine pricing system will increase taxes for pubs, clubs and hotels with high-earning gaming machines. 

The increased revenue these changes provide will go directly into the state’s Hospitals and Charities Fund, the Mental Health Fund, alcohol and drug treatment services and the Victorian Responsible Gambling Fund. 

These arrangements will come into effect when the current gaming machine licences expire in August 2022 – providing pubs, clubs and hotels the certainty needed to plan for the future. 

From August 2022, the price for gaming machine entitlements will be calculated using a formula based on a weighted average of a venue’s gaming machine revenue over the past four financial years, with a minimum price applying to club and hotel entitlements. 

The price paid by new entrants to the market will be calculated using the average gaming machine revenue at a venue of similar size, type and location. 

The post-2022 tax structure will introduce a new tax bracket for venues earning on average between $6,667 and $12,500 per machine, per month. In addition, a higher tax rate will apply to the top bracket (>$12,500 per machine, per month on average). High performing clubs will see a reduction to their tax concession based on a sliding scale. 

It follows the government’s decision to freeze the total number of gaming machines in Victoria and the number of machines allowed in a single venue for the next 25 years. 

Further harm minimisation measures relating to gaming machines will be announced in the coming months, following consultation with the community and industry earlier this year. The allocation of gaming machines entitlements is expected to start later this year and be complete by mid-2018. 

Incumbent venue operators can access their detailed price information via the VCGLR Venue Operator Portal.

7 July 2017 - New gaming machine arrangements

On 7 July 2017, the Minister for Consumer Affairs, Gaming and Liquor Regulation announced new gaming machine arrangements that will help limit gambling related harm and give certainty to pubs, clubs and hotels across Victoria.

7 July 2017 - announcement 

Under the changes, the number of gaming machines in Victoria will remain capped at 27,372 and the maximum number of gaming machines in a single venue will be frozen at 105.

The reforms include:

  • replacing the current 10 year term with a 20 year term, and requiring venue operators to make two sets of premium payments – the first in 2022 and the second in 2032
  • giving venue operators the opportunity to acquire post-August 2022 entitlements up to the number of entitlements they held on 7 July 2017 through an administrative allocation process, rather than a competitive process
  • increasing the maximum number of entitlements held by a club venue operator from 420 to 840
  • adjusting the 50:50 rule to facilitate the allocation of unused club entitlements to the hotel sector
  • determining premium payments for entitlements based on a venue’s gaming revenue
  • making changes to the current gaming machine taxation arrangements to make them more progressive.

These changes have been made as part of a review of the regulatory arrangements for gaming machines – enabling pubs, clubs and hotels to make decisions with certainty well before their current entitlements expire in 2022.

The allocation process is expected to be complete by the end of 2018.

New venue operators and existing venue operators wanting to acquire extra entitlements will have the opportunity to apply for entitlements not taken up during the initial offer.

Indicative gaming machine entitlement price calculator

Important disclaimer

The indicative price is a guide only and does not constitute the actual price payable for an entitlement. The Minister has not yet determined the price payable for an entitlement and reserves the right to determine a price which differs from the indicative price.

The Department makes no representations or warranties of any kind about the accuracy or suitability of the indicative price for any purpose. If you rely on the indicative price, you do so at your own risk. The State is not liable to you or any other person for any loss or damage arising from the use of, or reliance on, the indicative price.

Definitions

Gaming machine revenue - 2016-17 gaming revenue data (please see Price for new venue operators above for more information)

EGM - Electronic Gaming Machine

(
$
÷
)
x
46.35%
=
$
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